GlobeSt.com EXCLUSIVE: Investor Grabs 87,900-SF Suburban Prize

ARLINGTON, TX-Greenstreet Capital Partners and Henry S. Miller Investment Co. have flipped the 87,900-sf Sublett Corners, a 10.7-acre, top-draw retail center, to a 1031 exchange investor from Lubbock. The deal, bolstered by an IRR exceeding 35%, has closed just one month shy of a two-year hold.

The all-cash, tax free-exchange sale ends the first JV investment for the New York City-headquartered Greenstreet and Dallas-based Henry S. Miller Investment. The class A asset at 5900 S. Cooper St. was marketed to a select group of buyers without an asking price. Assessed at $8.5 million, Sublett Corners was sold to RGTSC LP, a Lubbock investment group that's been deploying 1031 exchange capital into commercial real estate for the past year. Majority owner Greenstreet has reported to its investors that the investment yielded an IRR exceeding 35%, net of success fees.

"It's hard to duplicate this deal," Stephen Harris, president of Henry S. Miller Investment Co., tells GlobeSt.com. "It was a very good return to the investors."

Harris, acknowledging the firm's reputation for long-term holds, says "we had completed the expansion, improved the leasing and wanted to take advantage of today's cap rates." The firm's management company is staying in place to lease and manage the asset, which effectively is 97% leased. The asset is positioned in a 13-mile retail corridor linking two interstates.

Harris says the sale went full circle in less than six weeks. The brokerage firm's Henry S. Miller IV and Dan Shoevlin negotiated the seller's terms while Michael McAuley put together the buy side.

Harris says the buyer's upside will come from rolling rents over time at the 20-tenant center, positioned in the shadow of a 57,232-sf Albertsons grocery store and anchored by a 34,000-sf Stein Mart. He says 10% of the leases roll this year and then taper off a few points until 2009 when the anchor's lease comes due. "It's a solid inflationary hedge," he explains. "It's a stable place for them to park income rather than get a quick return."

Sublett Plaza was built in 1999 by St. Ives Realty Inc. of Dallas. The Henry S. Miller-Greenstreet partnership, which then included Anthony Niosi, bought the shopping center for about $11 million, placing a contract before the developer could get it to market in early 2003. The deed included a 32,000-sf abutting tract that has since been built out with a 6,000-sf, three-tenant building.

Harris says the sale effectively closes out the partnership, for now. "There's nothing imminent, but it was a good partnership," he says. "They were happy with the return. And, we were happy with the return."